At €1.66, Is It Time To Put A2A S.p.A. (BIT:A2A) On Your Watch List?

A2A S.p.A. (BIT:A2A), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the BIT over the last few months, increasing to €1.99 at one point, and dropping to the lows of €1.66. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether A2A's current trading price of €1.66 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at A2A’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for A2A

What Is A2A Worth?

According to our valuation model, A2A seems to be fairly priced at around 3.92% above our intrinsic value, which means if you buy A2A today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth €1.60, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since A2A’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will A2A generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. A2A's earnings over the next few years are expected to increase by 59%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? A2A’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on A2A, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing A2A at this point in time. For example - A2A has 1 warning sign we think you should be aware of.

If you are no longer interested in A2A, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.